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Investment Securities
 9 Months Ended
Sep. 30, 2023
Investments, Debt and Equity Securities [Abstract]  
Investment Securities Investment Securities
On January 1, 2023, the Company adopted ASC 326, which made changes to accounting for AFS debt securities whereby credit losses should be presented as an allowance, rather than as a write-down when management does not intend to sell and does not believe that it is more likely than not they will be required to sell prior to maturity. In addition, ASC 326 requires an ACL to be recorded on HTM debt securities measured at amortized cost. All securities information presented as of September 30, 2023 is in accordance with ASC 326. All securities information presented as of December 31, 2022 or a prior date is presented in accordance with previously applicable GAAP. For further discussion on the Corporation’s accounting policies and policy elections related to the accounting standard update refer to Note 2.
The following table summarizes the activity in the ACL on HTM securities.
(Dollars in thousands)Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
Balance, beginning of period$163 $— 
Other debt securities, provision for credit losses(37)126 
Balance, end of period$126 $126 
The ACL for HTM securities was initially determined to be immaterial as of the date of adoption of ASC 326. Upon re-estimation in the third quarter of 2023, an ACL recovery of $37,000 was recorded based on the results of our evaluation at September 30, 2023. The provision for credit losses of $126,000 was recorded for the nine months ended September 30, 2023.
The following tables provide information on the amortized cost and estimated fair values of debt securities.
(Dollars in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Available-for-sale securities:
September 30, 2023
U.S. Government agencies$23,622 $4 $3,995 $19,631 
Mortgage-backed-residential63,371 — 9,798 53,573 
Other debt securities6,059 26 146 5,939 
Total$93,052 $30 $13,939 $79,143 
December 31, 2022
U.S. Government agencies$21,798 $5 $3,625 $18,178 
Mortgage-backed-residential72,183 2 8,666 63,519 
Other debt securities2,018 — 128 1,890 
Total$95,999 $7 $12,419 $83,587 
No AFS securities were sold from the Company’s legacy securities’ portfolios during the three and nine months ended September 30, 2023 and 2022. The Company sold virtually all of the AFS securities portfolio acquired from TCFC immediately after the legal merger with the proceeds of $430.0 million, and recognized gross losses of $2.2 million from the sale of securities.
(Dollars in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair ValueAllowance for Credit Losses
Held-to-maturity securities:
September 30, 2023
U.S. Government agencies$143,494 $— $14,873 $128,621 $— 
Mortgage-backed-residential367,712 — 61,177 306,535 — 
States and political subdivisions1,471 2 68 1,405 — 
Other debt securities10,500 — 1,409 9,091 126 
Total$523,177 $2 $77,527 $445,652 $126 
December 31, 2022
U.S. Government agencies$148,097 $— $13,601 $134,496 $— 
Mortgage-backed-residential398,884 — 50,464 348,420 — 
States and political subdivisions1,474 35 28 1,481 — 
Other debt securities 11,000 — 770 10,230 — 
Total$559,455 $35 $64,863 $494,627 $— 
Equity securities with an aggregate fair value of $5.4 million at September 30, 2023 and $1.2 million at December 31, 2022 are presented separately on the balance sheet. The fair value adjustment recorded through earnings totaled $0.3 million for the nine months ended September 30, 2023 and $0.1 million for the nine months ended September 30, 2022, respectively.
Credit Quality Information
The Company monitors the credit quality of HTM securities through credit ratings provided by Standard & Poor’s Rating Services and Moody’s Investor Services. Credit ratings express opinions about the credit quality of a security, and are updated at each quarter end. Investment grade securities are rated BBB- or higher by S&P and Baa3 or higher by Moody’s and are generally considered by the rating agencies and market participants to be of low credit risk. Conversely, securities rated below investment grade, which are labeled as speculative grade by the rating agencies, are considered to have distinctively higher credit risk than investment grade securities. There were no speculative grade HTM securities at September 30, 2023 or December 31, 2022. HTM securities that are not rated are agency mortgage-backed securities sponsored by U.S. government agencies, as well as direct obligations of the agencies, with the remainder being sub-debt of other banks.
The following table shows the amortized cost of HTM securities based on their lowest publicly available credit rating as of September 30, 2023.
September 30, 2023
Investment Grade
(Dollars in thousands)AaaAa1A3Baa1Baa2NRTotal
U.S. Government agencies$143,494 $— $— $— $— $— $143,494 
Mortgage-backed-residential367,712 — — — — — 367,712 
States and political subdivisions— 1,471 — — — — 1,471 
Other debt securities— — 4,000 4,000 500 2,000 10,500 
Total Held-to Maturity Securities$511,206 $1,471 $4,000 $4,000 $500 $2,000 $523,177 
The following tables provide information about gross unrealized losses and fair value by length of time that the individual securities have been in a continuous unrealized loss position at September 30, 2023 and December 31, 2022.
Less than 12 MonthsMore than 12 MonthsTotal
(Dollars in thousands)Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
September 30, 2023
Available-for-sale securities:
U.S. Government agencies$596 $1 $16,352 $3,994 $16,948 $3,995 
Mortgage-backed-residential433 4 53,140 9,794 53,573 9,798 
Other debt securities— — 1,866 146 1,866 146 
Total$1,029 $5 $71,358 $13,934 $72,387 $13,939 
Less than 12 MonthsMore than 12 MonthsTotal
(Dollars in thousands)Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
December 31, 2022
Available-for-sale securities:
U.S. Government agencies$1,165 $4 $16,585 $3,621 $17,750 $3,625 
Mortgage-backed-residential29,125 2,409 34,167 6,257 63,292 8,666 
Other debt securities1,890 128 — — 1,890 128 
Total$32,180 $2,541 $50,752 $9,878 $82,932 $12,419 
Held-to-maturity securities:
U.S. Government agencies$67,332 $2,786 $67,163 $10,815 $134,495 $13,601 
Mortgage-backed-residential148,771 9,402 199,649 41,062 348,420 50,464 
States and political subdivisions780 28 — — 780 28 
Other debt securities8,091 409 2,139 361 10,230 770 
Total$224,974 $12,625 $268,951 $52,238 $493,925 $64,863 
There were 116 AFS debt securities with a fair value below the amortized cost basis, totaling $13.9 million of aggregate fair value as of September 30, 2023. The Company concluded that a credit loss does not exist in its AFS securities portfolio as of September 30, 2023, and no impairment loss has been recognized based on the fact that (1) changes in fair value were caused primarily by fluctuations in interest rates, (2) securities with unrealized losses had generally high credit quality, (3) the Company intends to hold these investments in debt securities to maturity and it is more-likely-than-not the Company will not be required to sell these investments before a recovery of its investment, and (4) issuers have continued to make timely payments of principal and interest. Additionally, the Company’s mortgage-back securities are issued by either U.S. government agencies or U.S. government sponsored enterprises. Collectively, these entities provide a guarantee, which is either explicitly or implicitly supported by the full faith and credit of the U.S. government, that investors in such mortgage-backed securities will receive timely principal and interest payments.
All HTM and AFS securities were current with no securities past due or on nonaccrual as of September 30, 2023.
The Company has securities which have been pledged as collateral for obligations to federal, state, and local government agencies, and other purpose as required or permitted by law, or sold under agreements to repurchase. At September 30, 2023, the carrying value of pledged AFS securities was $53.3 million and $180.7 million of pledged HTM securities. The comparable amounts for December 31, 2022 were $72.1 million and $19.2 million, respectively.
The following table provides information on the amortized cost and estimated fair values of investment securities by maturity date at September 30, 2023.
Available for saleHeld to maturity
(Dollars in thousands)Amortized CostFair ValueAmortized CostFair Value
Due in one year or less$2,478 $2,479 $7,000 $6,873 
Due after one year through five years16,520 15,113 119,922 110,186 
Due after five years through ten years31,108 27,144 52,517 45,947 
Due after ten years42,946 34,407 343,738 282,646 
Total$93,052 $79,143 $523,177 $445,652 
The maturity dates for debt securities are determined using contractual maturity dates.